Summary: Australia is blessed with an abundance of natural resources, so it is no wonder commodities trading has become a rather popular investment strategy in this country. To buy, sell, and trade commodities, Australian residents can make an account at the commodity CFD trading platform Plus500.
Recommended Multi-asset Broker for Online CFD Trading
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Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange
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Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more
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Low cost investing - No commissions and tight spreads.
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Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.
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Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals
About commodities
What is commodity trading?
Australia is rich in natural resources, so the Australian commodities market offers investors a number of investment avenues. One common approach for retail investors in Australia is trading commodities via Contracts for Difference (CFDs), financial derivatives that let traders speculate on the future price movement of the underlying asset without actually owning it.
Where to buy commodities in Australia
Since commodities trading is a popular investment option in Australia, there are several reliable platforms available to traders who want to gain exposure to various products. These trading platforms offer a wide range of assets, from precious metals like gold and silver to energy commodities such as oil and gas.
One of the notable Australian trading platforms for commodities is Plus500, a CFD trading broker that lets traders gain exposure to the underlying assets and profit from their price fluctuations without actually owning them. That is, they allow investors to make predictions about the differences between the current value of the asset and its value at the time they bought the CFD. Thus, CFD trading is suitable for investors who want to take advantage of market fluctuations without the hassle of physically managing the commodities.
The Plus500 platform also comes with features such as:
- Free demo accounts;
- A license from the Australian Securities and Investment Commission (ASIC);
- Multi-asset Contracts for Differences (CFDs) on over 2,000 financial instruments, including commodities;
- Mobile app for convenient on-the-go investing;
- Convenient deposit options including PayPal, Visa, and Mastercard;
- Free withdrawals.
Recommended Multi-asset Broker for Online CFD Trading
-
Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange
-
Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more
-
Low cost investing - No commissions and tight spreads.
-
Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.
-
Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals
Understanding commodities
Before investing in commodities, it is essential to understand the intricacies and key principles of the market, familiarize yourself with the various kinds of assets that you can invest in, and choose a regulated trading platform. This knowledge will help you make better-informed decisions and capitalize on the potential of Australia’s dynamic commodities market.
Commodity trading basics
In Australia, commodities are traded primarily on the Australian Securities Exchange (ASX), and they are divided into two categories:
- Soft commodities, which include agricultural products, livestock, and renewable resources;
- Hard commodities, which are non-renewable resources, such as precious metals and.
Commodity prices in Australia and everywhere else can change rapidly due to various factors. Some of them include:
- Supply and demand: Changes in global production and consumption rates can affect commodity prices. An increase in demand or decrease in supply, for example, can cause prices to skyrocket; conversely, lower demand or increased supply can make prices fall;
- Currency fluctuations: Commodities are typically traded in USD. Consequently, any changes in the value of the dollar can impact commodity prices in all parts of the world;
- Geopolitical events: Political conflicts tend to result in market volatility. For instance, tensions or wars in oil-producing regions can lead to supply disruptions and impact oil prices;
- Inflation: Commodity prices are often linked to and affected by inflation.
Common commodity types in Australia
Australia is known for several types of commodities:
- Agricultural commodities: Commodities include crops such as wheat, corn, and sugar, as well as livestock products like meat and milk, which are all available and abundant in Australia;
- Energy commodities: Australia is rich in significant natural resources like crude oil, natural gas, and coal, all of which have a steady global demand, especially oil.
- Precious metals: Australia is a significant exporter of precious metals. In fact, it was the sixth-largest exporter of gold in 2022.
Cryptocurrencies and environmental commodities
In recent years, cryptocurrencies (for example, Bitcoin) have emerged as another potential area of investment alongside traditional commodities. Cryptocurrencies are digital currencies that operate independently of a central authority, such as a bank. Unsurprisingly, they have gained significant attention due to their potential for high returns and market volatility.
Like commodities, cryptocurrencies can be traded on various platforms, including exchanges that offer CFDs. However, while commodities are primarily traded on the ASX, that is not the case with crypto.
More importantly, it’s essential for traders to be aware that not all characteristics of commodities apply to crypto. Regular commodities, for example, are affected by supply and demand fluctuations, geopolitical tensions, and things like weather conditions. On the other hand, cryptocurrencies are more tied to regulatory changes, technological advancements, etc.
What makes commodity and cryptocurrency markets similar, however, is the fact that they can be highly volatile. Consequently, investors should consider their risk tolerance and financial objectives before committing to trading in these markets.
How to trade commodities in Australia safely
Risk management is crucial when participating in commodities trading, as it helps protect traders from potential losses and enhances their chances of profiting from market movements. To trade commodities safely, try to familiarize yourself with some common investing mistakes and:
- Try to use stop-loss orders: Stop-loss orders allow traders to limit their potential losses by closing a position once the commodity price reaches a predetermined range. These orders are an ideal way to manage risk and prevent massive losses when market fluctuations occur unexpectedly;
- Be cautious with leverage: Leverage tools allow traders to open larger positions using minimal capital by technically borrowing money from the broker. While leverage has the potential to amplify profits, it can also magnify losses if the market moves against the trader’s position. Therefore, only using it while thoroughly understanding the potential implications;
- Monitor the spread: The spread is the difference between the buying and selling prices of a commodity. A narrower spread indicates a more liquid and stable market. Trading in commodities with lower spreads can minimize risks associated with price volatility;
- Stay level-headed: It is crucial to set realistic profit targets and be prepared to accept moderate losses as part of the trading process. Constant monitoring of positions and adjusting strategies based on market situations helps traders manage their risk exposure effectively.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about trading commodities in Australia
How to trade commodities in Australia?
To trade commodities, Australian investors can register an account at an online commodities trading platform such as Plus500.
Do you have to pay taxes when trading commodities in Australia?
Australian investors might need to pay Goods and Services Taxes (GST) on commodities, including derivatives such as Contracts for Difference (CFDs), futures, and options.
How much money do you need to start trading commodities in Australia?
The minimum sum with which you can start trading commodities in Australia will depend on the broker you choose. If you registered an account with Plus500, for example, you will have to transfer a minimum of $100 before investing.
What are the top 5 commodities in Australia?
The top commodities in Australia include iron, coal, gold, and uranium, with commodities such as gas, nickel, and copper following.
Recommended Multi-asset Broker for Online CFD Trading
-
Reliable & Regulated by CySEC (#250/14) - Plus500 Ltd is a FTSE 250 company listed on the London Stock Exchange
-
Wide range of instruments - CFDs on stocks, crypto, forex, commodities, ETFs, and more
-
Low cost investing - No commissions and tight spreads.
-
Transparent pricing on overnight funding, currency conversion fees, guaranteed stop orders, and inactivity fees.
-
Advanced platform - Top notch analytical tools, real-time quotes, fast order execution, secure withdrawals
